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Hong Kong Liquidity Shrinks 50% Since May Amid Currency Defense

  • City’s aggregate cash balance has dwindled to HK$165 billion
  • Aggregate balance likely to fall below HK$100 billion: Mizuho
Hong Kong five-hundred, one-hundred and twenty-dollar banknotes.

Hong Kong five-hundred, one-hundred and twenty-dollar banknotes.

Photographer: Paul Yeung/Bloomberg
Updated on

A measure of Hong Kong’s interbank liquidity halved in the past two months, with analysts forecasting more cash drainage as the city’s de-facto central bank defends its currency.

The Hong Kong Monetary Authority has bought a total HK$172 billion ($22 billion) of local currency since May 11, shrinking the aggregate balance to about HK$165 billion. That has pushed up local interest rates, helping narrow the gap with the US to help the HKMA maintain its dollar peg.